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Financial management Advanced level

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1 Financial management Advanced level
This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

2 REVEAL Advanced course Financial management
Level: Advanced Domain : Financial management Throughout this course you will improve your skills in budgeting, accounting and reporting either in financial terms and in a non financial dimension that takes into account sustainability and accountability aspects, increasingly important in volunteering. Furthermore some advanced fundraising techniques and methodologies that may increase the financial capabilities of your organisation are presented.

3 REVEAL Advanced course Financial management
Module 1 Budgeting Project partners’ participation in budgeting process The budget of a project is a document that reveals an organisation’s ‘real strategy’ to achieve certain goals, despite what may be written in the work plan or other project documents. Indeed the budget is a tangible expression of what the organisation’s real priorities are. The budget of a project identifies the resources needed to produce the set results within the identified timeframe. A project’s budget should be drafted after defining all the other elements of the project: results (qualitative and quantitative); duration; work break down structure; roles and responsibilities of the various entities and individuals involved. All these elements affect the definition of a correct budget. Moduloe1: Budgeting

4 REVEAL Advanced course Financial management
Moduloe1: Budgeting The identification of the partners usually goes hand in hand with the definition of the project that takes place during the meeting between the workers and volunteers. The exchange of ideas among the team members in charge of project planning should bring to identify partner organisations who could play a strategic role in the project. The potential partners that could join the partnership should be contacted well in advance before the project submission deadline, in order to give them have plenty of time to consider the benefits and obligations of the proposal and to discuss into details their involvement with the other members of their organization. Furthermore, the responsibilities and tasks allocated to each partner should be clear in the formulation of the work plan and therefore in project budget.

5 REVEAL Advanced course Financial management
Stakeholders’ participation in annual and multi-year planning By the term “stakeholder” we mean any group or individual that may influence or be influenced by the achievement of the organisation’s aims. Among the typical stakeholders profiles involved in a non profit organisation, we can number: its fellow members, volunteers, collaborators, donors, users, families, public administrations, local community, other organisations, etc. Stakeholders’ sharing and participation in conceiving and building annual and multi-year planning can take place through: Local meeting with stakeholders Data gathering questionnaires A planning activity involving stakeholders can be structured – for instance – according to “Focus group” methodology, as follows: Sharing of the annual and multi-year planning elaboration process; Needs Analysis; Guidelines sharing; Programme definition. Moduloe1: Budgeting

6 REVEAL Advanced course Financial management
Module 2: Accounting and record keeping Module 2 Accounting and record keeping The accounting process The accounting process entails a series of activities that begins with a transaction and ends with the closing of the books. Because this process is repeated each reporting period, it is referred to as the accounting cycle and includes the major steps described below.

7 REVEAL Advanced course Financial management
Module 2: Accounting and record keeping Part 1: steps performed throughout the accounting period as transactions occur 1.1 Identify the transaction or other recognisable event. 1.2 Prepare the transaction's source document such as an invoice or a payslip. 1.3 Analyse and classify the transaction. 1.4 Record the transaction by making entries in the general journal (or petty cash journal). 1.5 Post general journal entries to the ledger accounts.

8 REVEAL Advanced course Financial management
Module 2: Accounting and record keeping Part 2: steps performed at the end of the accounting period: 2.1 Prepare the trial balance to make sure that debits equal credits. 2.2 Correct any discrepancies in the trial balance. 2.3 Prepare adjusting entries to record accrued, deferred, and estimated amounts. 2.4 Post adjusting entries to the ledger accounts and prepare the adjusted trial balance.

9 REVEAL Advanced course Financial management
Module 2: Accounting and record keeping 2.5 Prepare the financial statements. Income statement (referred also as ‘Statement on activities’): prepared from the revenue, expenses, gains, and losses. Balance sheet (referred also as ‘Statement on financial position’): prepared from the assets, liabilities, and equity accounts. Cash flow statement: derived from the other financial statements using either the direct or indirect method. 2.6 Prepare closing journal entries that close temporary accounts such as revenues, expenses, gains, and losses. 2.7 Post closing entries to the ledger accounts. 2.8 Prepare the after-closing trial balance to make sure that debits equal credits. 2.9 Prepare reversing journal entries (optional).

10 REVEAL Advanced course Financial management
Social accounting (also known as social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting, or accounting) Module 2: Accounting and record keeping The biggest difference between social accounting and economic-financial accounting lies in the dimension that the first one focuses on: as a matter of fact - in analysing the aspects related to the organisation’s management – it accounts for what is deemed relevant from an ethical-social point of view. Usually, it is difficult to accurately report at the end of the year those ethical-social facts and events of which the organisation has not properly kept record during the year itself . Therefore it is vitally important that the organisation arranges a reporting system capable of accounting – from time ti time - for all those social facts and events occured throughout the year at issue. Indicators provide synthetic information on created and distributed social value, ethics, philanthropy, environment, etc. Indicators must be: Significant, being relevant to the characteristics of the organisation and its stakeholders; Shared by the group and the organisation’s members; Measurable, namely capable of quantifying the observed events; Standardisable, to enable the comparison with similar organisations in space and time. As a consequence, according to one of their main principles, corporate social reporting systems build upon numbers – and not only words -.

11 REVEAL Advanced course Financial management
Module 3 Financial reporting Financial statement analysis: economic and financial indicators By the expression “financial statement analysis” we mean the analysis of an organisation’s operating results through the process of reading and analysing its balance sheets, together with extra accounting data of different nature. Economic and financial analysis of management activities through financial statements is characterised by the following operating steps: Data research through the organisation’s financial statements and other extra accounting information relevant to the analysis; data can be extrapolated from documents coming from the organisation itself (financial statements, official documents, acts) and from the outside; Balance sheet review and identification of the evaluation createria used for its drafting; Module 3: Financial reporting

12 REVEAL Advanced course Financial management
3. Reclassification of the asset and liability statement and profit and loss account on the basis of specific criteria supporting the analisys’ aims. Reclassifying the financial statement allows the organisation to re-elaborate and present its balance sheet through a set of schemes extremely useful for its economic and financial analysis; 4. Calculation of some indexes – getting this way to the core of financial analysis -. There are two different index types, sometimes used alternatively, at other times combined in a complementary way: The Location Quotient Technique, that studies the enterprise’s economic situation by making use of arithmetic ratios between balance sheet values; The Cash Flow Technique, that represents financial dynamics through “subtractions”. 5. Proper interpretation of the above-mentioned quotients. Module 3: Financial reporting

13 REVEAL Advanced course Financial management
Some economic and financial indicators that you should develop in order to carry out a comparative analysis starting from your forecasts at the begenning of the period at issue. The following indicators synthetically describe: The degree of dependency on a specific sponsor and/or a limited number of sponsors; The percentage of resources actually raised and used during the accounting period; The incidence of the charges destined to each management and activity area; The efficiency of fundraising activities; The efficiency of any possible accessory activities; The incidence of general support charges. Economic-financial indicators: Degree of dependecy on institutional bodies: (%) incomes from institutional bodies/total income; Degree of dependency on public corporations: (%) proceeds from public corporations/total proceeds; Degree of dependency on private corporations: (%) proceeds from private corporations/total proceeds; Degree of dependency on single private corporations: (%) proceeds from single private corporations/total proceeds; Degree of use of resources raised: (%) used resources/raised resources; Degree of incidence of core activities charges: (%) core activities charges/total charges; Degree of incidence of fundraising activities charges: (%) fundraising activities charges/total charges; Degree of incidence of general support charges: (%) general support charges/total charges. Module 3: Financial reporting

14 REVEAL Advanced course Financial management
Social reporting (also known as sustainability reporting, social and environmental reporting, corporate social reporting, corporate social responsibility reporting, non-financial reporting) Module 3: Financial reporting In addition to financial statements, in recent years non profit organisations have been increasingly focusing towards other dimensions to assess their performance, such as accountability and sustainability. In ethics and governance, accountability is answerability, blameworthiness, liability, and the expectation of account-giving. As an aspect of governance, it has been central to discussions related to problems in the public sector, non-profit and private (corporate) worlds. Accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation of actions and encompasses the obligation to report, explain and be answerable for resulting consequences.

15 REVEAL Advanced course Financial management
A social sustainability statement - in order to actually become an innovative tool, capable of serving its “accountability” function and acquiring a significant management and communicative role – must be the result of a well-structured process involving a big variety of subjects/entities. A typical reporting process structure is made up of six different steps: Preparation and planning; Analysis and modelling; Data collection; Drafting and validation; Communication; Fine-tuning Module 3: Financial reporting

16 REVEAL Advanced course Financial management
Module 3: Financial reporting Social sustainability report’s typical structure and content: Presentation and methodological note; Identity; Government and Human Resources; Economic and financial resources and patrimonial endowment; Pursuit of the mission; Instrumental activities; Other issues significant to stakeholders.

17 REVEAL Advanced course Financial management
Module 4 Fundraising Profit and non-profit: cooperation strategies Module 4: Fundraising Many companies donate to non-profit organisations in various ways. The donation from business sector plays an increasingly important role in the overall program of fund raising. Before start looking for a cooperation with the for-profit world volunteering organisations should: 1. ESTABLISH RULES: Which companies do we want to cooperate with? Which companies we must be careful with? What is the public opinion about this company, how does the company treat its employees? Which companies should we prefer? 2. UNDERSTAND BUSINESS MECHANISMS: Companies aim to make profit; Usually they do not donate for generic purpose; For profit companies wish their donations improve their corporate image 3. SPEAK THEIR LANGUAGE 4. ALWAYS MAKE A COOPERATION AGREEMENT

18 REVEAL Advanced course Financial management
Module 4: Fundraising There are different types of donations from for-profit companies to non-profit organisation: - PHILANTROPIC DONATION It is a pure charitable donation (in cash or goods) by a company to a non-profit organisation and often it is bound by an agreement on the aims of the financed activity. - JOINT PROMOTION The companies did not support the cause of a non-profit organisation through a direct financial contribution; rather they offer their support to the visibility of the message to promote fundraising and awareness campaigns. - SPONSORSHIP The sponsorship is the support provided to a non-profit organisation in terms of resources (financial, organizational, managerial) for the implementation of an initiative. The sponsorship creates an indirect link with the cause.

19 REVEAL Advanced course Financial management
Module 4: Fundraising INITIATIVES WITH EMPLOYEES The company act as intermediary collecting the offerings of employees who choose to donate to a non-profit organisation a monthly amount, or one or more hours of paid leave by deducting the amount on the payroll. - Gift Matching The company chooses to donate doubles amount donated by employees. - Volunteer programme The company encourages its employees to spend a few hours of work to voluntareering, still remunerating working hours donated. - Loyalty card scheme The company may offer club card holders the possibility to substitute the prize with a donation to an non-profit organisation.

20 REVEAL Advanced course Financial management
Module 4: Fundraising CAUSE RELATED MARKETING (CRM) It is a marketing activity that involves a partnership between a company and a non-profit organisation. The company is committed to donate a specific amount for a social cause for each product or service sold! Features: It’s a tool that aims to promote sales It uses marketing techniques It provides a donation subject to a transaction. (You donate only if you buy) It involves the participation of consumers

21 REVEAL Advanced course Financial management
10 rules for effective alliance: Sharing objectives with partners is essential; There must be a strong connection and consistency between the values ​​of the non-profit organisation and those of the business company; Non-profit organisations should have specific expertise (e.g. marketing) for the partnership management; The development of the alliance must be supported by the organisation’s and company’s Governance; It is necessary to establish a dedicated project team; It would be worth to actively involve also the staff of the company; The value of the donation to support the project and the social cause should be agreed between the parties balancing social needs with business needs; Communication activities must be coherent with each other and implemented in an integrated manner, allowing the generation of a strong synergistic action; External communication from the partnership must be truthful, transparent and consistent with the effective engagement of the business company; The partnership should be characterized by an evolutionary process, aimed at improving and renewing the collaborative actions undertaken. Module 4: Fundraising

22 REVEAL Advanced course Financial management
Module 4: Fundraising Mailing in fundraising Mailing is a written request for donations that is distributed and delivered by mail. It is the most effective method to build a broad base of donors and increase revenue for thousands of non-profit large and small organizations. You need to use some fundamental notions and strategies appropriately to the situation of your organization. Mailing concerns three main areas: Potential donors: acquire new donors Renewals: renewal or increase current donations Extraordinary appeals: seek donations ​​for extraordinary purposes.

23 REVEAL Advanced course Financial management
Module 4: Fundraising The feasibility of a mailing program should not be judged on the basis of a single mailing operation. The mailing is a cumulative and continuous programme which must be maintained for several years. It can take three or four years before the program reaches the balance. Its basic components are: - The acquisition of new donors The renewal and extraordinary appeals Combining these two components along years will produce a list of reliable donors, increasing the number of donors and the quality of donations.

24 REVEAL Advanced course Financial management
Module 4: Fundraising On line fundraising Donations come only if you ask for them! The World Wide Web is a great resource for those who carry out communication activities within non-profit organisations – included those related to fundraising campaigns -. Even though online fundraising represents on average 2% of total fundraising activities, it is worth creating and carrying out “DONATE NOW” CAMPAIGNS. What must occupy a prominent position in its HOME PAGE is: WHO WE ARE, WHAT WE DO (and HOW), WHAT YOU CAN DO.

25 REVEAL Advanced course Financial management
Module 4: Fundraising WHICH CHARACTERISTICS SHOULD YOUR “DONATE NOW” LANDING PAGE HAVE? A. CONTENT It has your organization’s branding There is an Opt-in Option for an E-newsletter It has the option to give monthly or quarterly It has the Option to give in someone else’ name It is designed for expediency

26 REVEAL Advanced course Financial management
B. FORM Large buttons: Use large “Donate now” buttons: it will help you collect larger donations. Colours play an important role: different colours produce a different impact on donations, since colours arouse emotions and feelings, consequently driving people to act. Black – authority and power White – innocence, purity, cleanliness Red – intensity and love Blue – peace, calmness and, sometimes, solitude, cold, depression Green – nature Yellow – happiness Ask only for the information you need: eliminate the excess fields from the personal information that donors are asked for. It will help you obtain better results. Kindly remind people why you want them to donate Always test your tools and choices Module 4: Fundraising

27 REVEAL Advanced course Financial management
Module 4: Fundraising ‘DONATE NOW’ CAMPAIGNS Donate Now technology first became available to the non-profit sector in 1999.The early adopters of “Donate Now” buttons in the non-profit community were convinced that the technology would revolutionise philanthropy. Today Donate Now technology is finally starting to achieve its potential and is transforming fundraising and giving. The result online giving is growing consistently and rapidly with each passing year. There are over 100 Donate now providers available and you can easily be overwhelmed by the number of choices and the differences in functionability offered by each. Some examples: Network for good Just Pay Pal

28 Thank you! This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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